Mumbai, June 8, 2025: AU Small Finance Bank (AU SFB) has partnered with the International Finance Corporation (IFC) to integrate climate risk considerations into its core banking framework. The initiative, launched in alignment with evolving regulatory expectations and global standards, aims to strengthen the bank’s resilience to climate-related financial risks.
Under this climate risk advisory program, AU SFB will embed environmental considerations into its governance, strategic planning, risk management processes, and ESG disclosures. IFC will support the bank in quantifying, disclosing, and managing climate risks, in accordance with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Reserve Bank of India’s climate guidelines.
The program involves three key components:
- Physical Risk Assessment: Evaluation of the bank’s loan portfolio exposure to hazards like floods, droughts, and extreme weather, using IPCC climate scenarios and projections through 2100.
- Transition Risk Assessment: Analysis of financial risks linked to policy, market, and technological changes as India moves toward a low-carbon economy, using NGFS scenarios.
- Financed Emissions Calculation: Measurement of financed emissions (Scope 3, Category 15) across corporate loans, SME finance, real estate, and sovereign bonds for FY 2024–25 and FY 2025–26, using the Partnership for Carbon Accounting Financials methodology.
To implement the initiative, IFC is working with climate risk solutions firm StepChange. The project is supported by the Government of Japan.
Sanjay Agarwal, Founder, MD & CEO of AU Small Finance Bank, noted that the partnership marks a key step in the bank’s sustainability journey. He said inclusive growth must also be sustainable and emphasized that climate resilience is essential for ensuring long-term financial inclusion. The initiative reflects AU SFB’s commitment to responsible banking and creating sustainable value, especially in underserved regions.
AU SFB has already demonstrated progress in this area through initiatives like its Green Fixed Deposit product, which has raised ₹1,178 crore as of March 31, 2025, for investments in renewable energy and clean transportation. The bank has also achieved a low-risk ESG rating of 17.1 from Sustainalytics and an AA rating in the MSCI ESG assessment.
